Retail

Kicking The Wheels Online Amid Auto Sales' Great Digital Shift

online car buying

The great digital shift has left no vertical untouched, changing the way we browse for, select and buy … pretty much everything. That includes big-ticket items like cars and trucks that once involved the process of kicking the literal tires.

Turns out the age-old, tactile experience of visiting showrooms, meeting dealers, test drives and haggling over price can quickly fall by the wayside in favor of a streamlined series of clicks.

Along the way, pricing and inventory is becoming standardized in an industry notorious for a fragmented system of sticker prices, MSRP, book value, dealer pricing and stock outs … and hours of frustration.

As reported by the Financial Times, at least some vehicle manufacturers — including PSA (which owns Peugeot) and Volkswagen — are embracing new models that are taking the vehicle-buying process down previously untraveled roads. PSA, for example, is placing greater emphasis on online sales, with a reported goal of delivering 100,000 vehicles to consumers, effectively cutting out the showroom middleman. Elsewhere, VW’s ID.3, an electric vehicle, will feature standardized pricing that will be in place regardless of whether vehicles are sold in brick-and-mortar locations or online in Germany.

“By 2025, 25 per cent of our passenger car sales will be made via online channels,” said Daimler Chrysler’s Britta Seeger, head of Mercedes Benz cars marketing and sales. Daimler, she said, is in the midst of investing what she told the FT is a  “triple-digit million-euro amount” in online efforts to build digital dealerships.

The manufacturers join a greenfield opportunity increasingly populated by digital firms and online platforms that eye direct-to-consumer sales to help transform the auto industry. The pivot from browsing in showrooms to opening browsers comes against a backdrop where, as noted in this space, U.S. auto sales are projected slide by double digits this year, as economic headwinds and high unemployment continues, and showrooms just start to emerge from widespread shuttering.

But a look under the proverbial hood shows that new and used vehicle sales may benefit from an increased emphasis on digital channels. Carvana, which focuses on used vehicle sales, saw car sales (in units) grow by 25 percent, while revenues grew by 13 percent, year on year, as noted in the most recent quarter.

Online sales still have significant room to grow, as Reuters reports, accounting for only 1 percent of the $840 billion spent each year online on used cars — and that’s in the U.S. alone. But the interest is there, and where there’s interest there is likely to be increased buying. CarGurus Inc. said on its most recent earnings call that 61 percent of consumers surveyed (700 of them) this year would be open to buying a vehicle online, up from 32 percent before the pandemic hit. That interest is not confined to the U.S. alone, as Statista noted in June that, via CapGemini findings, there is at least some interest in buying vehicles online — 32 percent of respondents from the U.K., 44 percent from India and 49 percent from China would consider purchasing cars online in a future, post-pandemic world.

To get there requires, of course, a buildout of the digital infrastructure needed to support such interest — and buying activity. Reuters noted that Vroom has spent as much as $1 billion to build out online operations and Carvana has spent $2 billion since 2013 on its own online efforts.

The Harris Poll and Urban Science reported last month that, among roughly 1,500 consumers, 61 percent said the vehicle buying process will change “forever” because of the pandemic, while 78 percent said there is at least some benefit to car shopping done entirely online — with 37 percent citing convenience and 32 percent noting safety. A full 36 percent said there is no reason to ever have to visit a dealership, according to the data. As for the fabled test drive, 27 percent said fewer people will do test drives before pulling the trigger and buying or leasing a vehicle.

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